BUSINESS RATES have overtaken corporation tax in the contribution made by the UK’s biggest companies for the first time, according to the latest survey by PwC and the 100 Group of finance directors.
The total tax cost compared to profit is now 42.9% at £80.5bn, up from 41.4% in 2014 and 38.3% in 2013 – when looking at the tax paid by the top UK listed and senior companies. Business rates now make up 21% of tax bills, with corporation tax at 18.3% (from 23.4% a year earlier). National Insurance Contributions are the largest tax cost to these businesses, at 29.4%.
The main rate of corporation tax has been consistently cut by chancellor George Osborne. The main rate for 2014/15 was 21%, and is equalised across small profits and the main rate at 20% for 2015/16.
Other issues impacting the balance of different tax bills include falling profitability in the oil & gas and retail sectors, and the introduction of other levies and higher rates.
“Successive governments have deliberately reduced reliance on volatile profit taxes by taxing businesses in other ways. Four fifths of business tax costs now come from taxes that many people may not have heard about and the new apprenticeship levy will further increase the contribution from large business,” said Kevin Nicholson, head of tax at PwC.
“There needs to be transparency on all the taxes businesses pay and how they impact particular industries.”
The report comes as large companies face more scrutiny about how they mitigate their tax bills. Earlier this month the Financial Reporting Council set out its stall to undertake a review of companies’ tax reporting to encourage more transparency around the reported bill and their accounting profit.
There have been suggestions that disclosing tax strategy could lead to confidentiality issues.
Charts source: PwC